1 supply chain strategic assessment for the digital business imperative…

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Supply Chain Strategic

Assessment for the Digital Business

Imperative…

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Digital Business Imperative

“The storm that’s arriving—the real disturbance in the force—is when the thousands and thousands of institutions that exist today seize the power of this global computing and communications infrastructure and use it to transform themselves. That’s the real revolution.”

- Lou Gerstner, IBM

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Agenda• Supply Chain Strategic Assessment - Focus of

Study

• Phase I • The Supply Chain Processes• Methodology Overview

• Phase II • Strategic Alignment for the Digital

Economy • Methodology Overview

• Question and Answers

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Supply Chain Management Definition

“the process of developing decisions and

taking actions to direct the activities of

people within the supply chain toward

common objectives”

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Why this multi-year study?

• The need to determine the decision making processes that are key to effective supply chain performance.

• The need for further definition of practices and PRINCIPLES that impact performance of the decision processes.

• The need for a “conversation framework” to share issues and information about the decision processes.

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Focus of Study• Explores the current decision making

practices, principles and decision process performance in the four SCOR process areas:

PLAN, SOURCE, MAKE, and DELIVER.

• Attempts to identify the practices and principles that best correlate to superior decision-making performance in Supply Chain Management.

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The Supply Chain Decision Process Groupings

Suppliers’Supplier

Supplier

Internal or External

Your Company Customer

Internal or External

Customer’sCustomer

Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source

Plan

Operational Strategy Planning

Procurement

Planning & Scheduling

Promise Delivery

Distribution Management

Demand Management

Balancing Change

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Methodology Overview Research Objectives

• Determine what Supply Chain Management practices relate to superior performance.

• Determine the Best Practices that relate to superior supply chain performance.

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• Determine how the “common themes” questions relate to performance.

• Determine what practices "go together“. (strongest inter-correlation, factor analysis).

• Determine the frequency and institutionalization for Best Practices.

Methodology Overview Research Objectives

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Methodology Overview • Questions were developed through

hundreds of interviews with practitioners.

• Questions were organized by SCOR model area.

• A survey questionnaire was developed using a scale measuring the frequency of the principle or practice.

1- never or does not exist2- sometimes3- frequently4- mostly5- always or definitely

exists

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How Effective is Your Supply Chain Management?

The Supply Chain Strategic Assessment Will Show You

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The Supply Chain Maturity Model

What Is It ?

The means to assess the quality and effectiveness of the supply chain management process.

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How Is It Used?

The model currently defines five levels of supply chain management maturity ranging from Ad hoc to Extended (world class).

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How Is It Used? (Continued)

The model extends the value and capabilities of the SCOR Model by looking at

• integration, strategy, cooperation, collaboration, • jobs, organization structure, • measurement systems, best practices, • customer focus and • the level of cross-functional and cross-company

process definition, interaction and understanding.

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The Supply Chain Maturity ModelPhase I

What Can I Learn From The Model?

Understanding and insight into the degree

of maturity and level of sophistication of

your supply chain management processes

relative to other enterprises and industries.

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Levels of Supply Chain Maturity

Ad Hoc , Level 1:

The supply chain and the SCM practices are unstructured

and ill-defined. Process measures are not in place and the

jobs and organizational structures are based upon the

traditional functions, not horizontal supply chain

processes. Individual heroics and “working around the

system” are what make things happen.

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Defined, Level 2:

The basic SCM processes are defined and documented.

The order commitment, procurement and other processes,

for example, are available in flow charts, and changes to

these processes must now go through a formal procedure.

Jobs and organizational structures include an SCM aspect,

but remain basically traditional.

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Linked, Level 3:

The breakthrough level. Managers employ SCM with

strategic intent and results. Broad SCM jobs and

structures are put in place outside of traditional

functions. One common indicator is the appearance of

the title "supply chain manager."

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Integrated, Level 4:

The company, its vendors and suppliers, take cooperation to the

process level. Organizational structures and jobs are based on

SCM procedures, and traditional functions, as they relate to the

supply chain, begin to disappear altogether. SCM measures

and management systems are deeply imbedded in the

organization. Advanced SCM practices

take shape.

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Extended, Level 5, World Class:

Competition is based upon multi-firm supply chains.

Collaboration between legal entities is routine to the point

where advanced SCM practices that allow transfer of

responsibility without legal ownership are in place. Trust

and mutual dependency are the glue holding the extended

supply chain together. A horizontal,

customer-focused, collaborative culture

is firmly in place.

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Understanding the Supply Chain Management Maturity (SCM) Model

•Using this framework, managers can pinpoint areas of

progress and stagnation.

•A maturity scale matrixed against six measurement

categories provides a powerful visual scorecard of the

current situation in each area of opportunity.

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The Supply Chain Management Maturity Model

ProcessView

Process Structures

Process Jobs

Process Values/ Beliefs

Process Management / Measurement

Best Practices

Ad Hoc

Defined

Linked

Integrated

Extended

Basic ProcessStructure

Basic Process

Jobs

Basic Operation Strategy

BasicSCM

Advanced ProcessFocus

AdvancedSCM

Measures

Basic SCM

Measures

Advanced Process

Documentation

AdvancedProcess

Structure

AdvancedSCM

Practices

Basic SCM

PracticesBasic Process

Documentation

Engine GroupChassis

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Examples of Supply Chain Management Process

Opportunities (SCOR View)

•PLAN Example Opportunities to Consider

• Engage your suppliers /customers in plan

development, execution and review.

• Integrate customer information into demand planning

and increase granularity of forecast by customer.

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SOURCE Example Opportunities to Consider

• Integration of suppliers early in planning and

scheduling process.

• Formalize a cross-functional “source” team that meets

on a regular basis.

• Electronic and “people” integration of

suppliers into “source” process.

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MAKE Example Opportunities to Consider

•Review and update “actual” monthly supplier

lead times.

•Integrate customers planning / scheduling

information with yours.

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DELIVER Example Opportunity to Consider

•Automatic replenishment of customer's

inventory and distribution.

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Beyond the Supply Chain Management Maturity (SCM)

Model?

Integrated

Defined

Linked

Ad Hoc

Extended

ProcessView

ProcessStructures

ProcessJobs

ProcessValues/ Beliefs

ProcessManagement /Measu rement

Best Practices

The SCM Maturity Model

Advanced Process

Documentation

Basic Proce ssStructure

Advanced Process

Structure

Basic Operation

Strategy

Basic Process

Jobs

Basic SCM

Advanced ProcessFoc us

Basic SCM Measures

Advanced SCM

Measures

Basic SCM Practices

Advanced SCM

Practices

Basic Proce ssDocumentation

Digitization and Internet?

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Beyond the Supply Chain Maturity Model

Phase II

The Digital Business Imperative

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Supply Chain Evolution Framework

The Supply Chain configurations in this digital economy are reshaping the historical “chain” into “networks”.

These configurations are quickly demanding the evolution of supply chains beyond the “extended” stage of the SC Maturity Model.

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Digital Company-to-Company Structures

The Virtual Face

Digital form of an existing non-digital function.

Example: Web versions of newspapers

Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000

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Shared partnership

Example: Collaborative design, engineering & support, and collaborative planning between a singular supplier and a customer

Co-Alliance Model


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Star-alliance Model

Hub represents interconnected members of coordinated networks surrounded by satellite organizations.

Examples: New automotive “vertical” market


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Value-alliance Model

Range of products or services in one package

Example: Defense contractors supplying parts and support to a certain weapons system


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Market-alliance Model

Members depend upon each other for the supply of actual products and services and operate in a digital market.

Example: Amazon.com


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Virtual Broker

Designers of dynamic networks or net-market makers

Example: B2B vertical marketplaces formed to bring buyers and sellers together.


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Phase I – SC Maturity Model

The Extended Level Could Not be adequately measured.

Now, the Internet makes it…

…attainable;…affordable;…measurable.

Supply Chain Strategic Assessment

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Suggested Digital Supply Chain

Definition

“extending outward beyond company boundaries to your customers and suppliers and connecting with them through the use of digital technologies and integrating practices.”

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Methodology Overview • Phase I - Questions were organized by

SCOR model area. Include Integrating Practices for Digital Business Creation

• Phase II – Digital Technology specific questions

• A new survey questionnaire was developed using the existing scale measuring the frequency of the principle or practice.

1- never or does not exist2- sometimes3- frequently4- mostly5- always or definitely exists

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Methodology Overview Digital Technologies Sample Questions

• Do your customers place orders for your goods and services through the Internet?

• Do you gather customer data (usage, forecast, ideas, complaints) though the Internet?

• Do you gather information about your suppliers (and their products) through the Internet?

• Do you gather supplier data (performance, forecast, ideas) through the Internet?

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Methodology Overview

Integrating Practices Sample Questions from Phase I

“Extending outward to Suppliers and Customers”

P15 Does this team (operations strategy team) participate in supplier and customer relationships?

S8 Do you share planning and scheduling information with suppliers?

S10 Do you "collaborate" with your suppliers to develop a plan?

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Methodology Overview

Integrating Practices Sample Questions from Phase I

“Extending outward to Suppliers and Customers”

P25 Does your demand management process make use of customer information?

M13 Is your customer's planning and scheduling information included in yours?

D12 Do you automatically replenish a customer’s inventory?

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Beyond the Extended Digital Supply Chain

By developing a Digital Supply Chain that goes beyond the “extended” level using the enabling power of the new digital technologies, a company can build unique capabilities that lead to a sustainable competitive advantage.

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Thank You!

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Contact:

Katie KasperSapient [email protected]

614.207.9135

Questions and Answers

mailto:[email protected]

1 supply chain strategic assessment for the digital business imperative…

Documents

supply chain maturity

decision process performance

best practices

decision processes

superior performance

definition of practices

methodology overview

current decision